How to invest in disruptive technology

BlackRock’s Rob Powell speaks to Victoria Scholar about two iShares ETFs focused on digitalisation, robotics and automation.

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results

About BlackRock’s Digitalisation ETF and its performance

Digitalisation has been front and centre recently, thanks to concerns about privacy after Facebook’s data leak. Amazon was also in focus after US President Donald Trump sent a series of tweets appearing to ‘go after’ the tech giant.

The first quarter 2018 net total return for BlackRock’s digitalisation exchange traded fund (ETF) in US dollars versus the MSCI ACWI index was 7.87%. It includes some of the biggest US tech companies including Alphabet, Amazon, and Facebook. US companies make up almost 50% of the ETF, although it has a global composition with companies from the UK and Asia too.

UK-based software trading provider Nex Group was the strongest performer. The shares moved sharply higher following a takeover approach from CME Group.

BlackRock says: ‘”Digitalisation” described the integration of digital technologies into every area of business and private life. Nex Group is a great example, as it would be classified as a ”financial” stock in a traditional sector framework’.

Another stock that performed very well was Ahnlab Inc in South Korea, a security software provider. BlackRock says it benefitted from ‘an increased focus on protecting devices’.

Netflix was another high-profile tech stock that performed very well. BlackRock says ‘the company added further subscribers to its online media streaming service and margins were boosted by Netflix original content which cannot be watched anywhere but on the platform’.

On the downside, Swedish biometrics company Fingerprint Cards was the worst performer in the ETF.

About BlackRock’s Automation and Robotics ETF and its performance

The themes of automation and robotics have also received some bad press this quarter. New OECD research suggests 14% of all jobs will be automated in the coming years. Meanwhile, BlackRock says the ‘tragic Uber self-driving car death leads to a pause in the automated vehicle (AV) development’. Nonetheless, BlackRock’s Automation and Robotics iShares ETF (RBOT) outperformed the MSCI ACWI by 5.19%.

The UK conveyor equipment manufacturing company Fenner was one of the drivers of the outperformance. It was the strongest performer thanks to a £1.2 billion bid for the UK company from France-based Michelin.

Companies related to the rise in semiconductor usage also performed well, including Lasertec, which BlackRock describes as a ‘Japanese provider of semiconductor inspection equipment’. Artificial intelligence (AI) was another area of strength, with Dassault Systemes performing well. BlackRock describes it as a ‘French software provider that uses artificial intelligence in a wide range of domains, from modelling and scientific simulation to logistics optimisation’.

Coherent in the US and EO Technics in Japan were among the worst performers over the quarter. 

You can explore ETFs relating to digitalisation, robotics and automation using IG’s ETF screener

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